Sept. 23 (Bloomberg) -- Euro-area services growth
accelerated to the fastest in more than two years in September
as demand and confidence improved.

An index of activity rose to 52.1 from 50.7 in August,
London-based Markit Economics said today. A composite gauge of
services and manufacturing increased to 52.1 from 51.5.
Economists forecast 51.8, based on the median of 25 estimates in
a Bloomberg survey. A reading above 50 indicates expansion. In
China, factory growth accelerated to the fastest in six months.

The economy of the 17-nation region is showing signs of
recovery since emerging from its longest ever recession in the
second quarter. Growth is being led by Germany, where Angela
Merkel won an overwhelming endorsement from voters in an
election yesterday on her handling of the euro-area crisis.

“The euro-zone economy has ended the third quarter on an
encouraging note,” Martin van Vliet, an economist at ING Bank
NV in Amsterdam, said in a note to clients. “But a further
strong acceleration in the pace of recovery seems unlikely in
the near term,” he said, citing deleveraging that will curb the
pace of domestic demand.

Demand Rises

The euro-region manufacturing index declined to 51.1 this
month from 51.4 in August. New orders at factories rose for a
third month, Markit said. Within services, demand also rose,
while expectations for activity in the next 12 months increased
to the highest in 1 1/2 years, according to the report.

“The improvement in demand signaled by the data on new
business also led to fewer job losses,” Markit said. Payrolls
fell the least since January 2012 as services employment
stabilized.

The euro was little changed after the survey was released,
and was trading at $1.3519 as of 10:09 a.m. London time. The
Stoxx Europe 600 Index rose 0.1 percent.

In Germany, Europe’s largest economy, a services measure
surged to 54.4 from 52.8, exceeding the median forecast of
economists in a Bloomberg survey. A factory gauge fell to 51.3
from 51.8. The French manufacturing index slipped to 49.5 from
49.7, while services strengthened to a 20-month high.

In the German election, Merkel’s Christian Democratic bloc
took 41.5 percent of the vote, compared with 25.7 percent for
the Social Democrats of Peer Steinbrueck, according to results
from all 299 districts. While that leaves her short of a
majority and needing a coalition partner, the result puts her in
line for a third term as chancellor.

Economic Outlook

Economists in a Bloomberg survey this month forecast that
the euro-region economy will grow 0.2 percent in both this
quarter and the last three months of 2013.

L’Oreal SA, the world’s largest cosmetics maker, said in
August that first-half earnings rose 7.7 percent and confirmed
its full-year targets on stronger sales in emerging markets.

In China, a manufacturing Purchasing Managers’ Index rose
to 51.2 in September from 50.1 in August, based on a preliminary
reading today from HSBC Holdings Plc and Markit. The reading,
which was above the median estimate of economists in a Bloomberg
survey, signals that a rebound in the world’s second-largest
economy is gaining steam.

While the European Central Bank raised its 2013 euro-zone
economic projection this month, it still sees a 0.4 percent
contraction and expects only a “gradual” pickup in activity.

“I’m very, very cautious about the recovery,” ECB
President Mario Draghi said on Sept. 5 after policy makers kept
the key interest rate at a record-low of 0.5 percent. He
reiterated his commitment to keeping rates low for an extended
period.

While the recovery remains weak, confidence is improving.
Sentiment among households increased to minus 14.9 this month,
the highest level since July 2011, from minus 15.6, the European
Commission said in a preliminary report on Sept. 20.

A combined measure of executive and consumer sentiment
probably rose to the highest in two years, economists said
before a report on Sept. 27. That gauge strengthened to 96 from
95.2, according to the median of 26 estimates in a survey.